As a business owner one of the toughest parts of your job is to make sure you have enough cash flow to pay employees and cover expenses. The technique most of us use is when we pool our capital into a separate reserve account and use the capital to pay expenses. The pool of capital gets re-filled as our customers start to pay us back.
However a client may take 30 to 60 days to pay back on an invoice. Depending on how large your pool if capital is you run the risk of not having the funds on hand to pay your expenses. At the same time you cannot use the capital for other projects, or marketing needs. Many owners will not touch their reserves of capital out of fear, because they run the risk of not having the ability to pay their bills.
This leaves many business owners in a tough position, they know they need to hold on to capital in order to pay their bills, yet they also know they need some of that capital for marketing, new projects, and growth.
Let us not overlook the obvious: Just because you offer 30 day terms does not mean you always get paid within those terms. Many businesses understand that clients are late on payments. Depending on industry late invoices may be a common problem.
If you extend credit to your customers, a better strategy is Business financing. All of the major corporations use business financing to remove uncertainty from receiving invoices, and also to show cash balances on their financial statements.
The business financing method many business owners are taking advantage of is called factoring invoices. The process of factoring invoices lets your business collect the capital for your invoices within days. This gives you a solid revenue stream so you do not have to keep a pool of reserve capital. Factoring invoices also lets you extend your credit terms to your customers, and pay your bills early to take advantage of possible early discounts.
Factoring invoices is done by a financial company called a factor such as Neebo Capital. The factor give your capital for your invoices for a small fee usually less than 1.59% . The factoring company then collects the invoices from your customers. Keep in mind, not all companies function like NeeBo Capital, only Neebo waits until your invoices are paid in full before they collect their fee.
Getting down to business, we clearly see factoring invoices has its advantages. As a business owner you get a clearer picture on how your capital flows. Your management can focus more on marketing and growth rather than cash flow management. Factoring companies are all over the internet it is important to do your research to find out what works best for you. For more information on factoring invoices please visit blogs.neebocapital.com